PALO ALTO, Calif.--(BUSINESS WIRE)--Nov. 9, 2009--
Southwall Technologies Inc. (OTCBB:SWTX) announced third quarter 2009
revenue of $8.6 million, up 3% from second quarter 2009 revenues of $8.3
million and down 19% from third quarter 2008 revenues of $10.6 million.
The year over year decrease was primarily due to a decline in sales of
automotive and window film products primarily driven by lower market
demand caused by the global economic downturn.

Third quarter 2009 net income was $0.7 million, or $0.02 per diluted
share, as compared to net income of $1.5 million, or $0.04 per diluted
share in second quarter 2009, and $1.0 million, or $0.03 per diluted
share in third quarter 2008. Net income in the second quarter 2009
included $0.5 million of other income relating to the receipt of the
final milestone payment under the Technology Transfer and Services
agreement with Sunfilm.

Third quarter 2009 gross profit was $3.7 million, or 43% of net
revenues, as compared to $3.7 million, or 44% of net revenues, in second
quarter 2009 and $4.2 million, or 40% of net revenues, in third quarter
2008. The Company posted income from operations of $1.0 million in the
third quarter 2009, as compared to $0.9 million in the second quarter
2009 and $1.4 million in the third quarter 2008.

In addition, the Company reached an amicable settlement with Pilkington
Automotive GmbH on a patent allowed by the European Patent Office. The
agreement consists of an up-front license payment with no future
royalties or other licensing restrictions for Southwall or its customers.

“Despite the year over year sales decline, we are generating cash and
continue to invest in longer term growth opportunities,” said Dennis
Capovilla, Southwall’s President and CEO. “As the economy begins to
stabilize, we see strong potential for growth across all markets
relating to energy efficiency, and we remain focused on realizing longer
term growth.”

About Southwall Technologies Inc.

Southwall Technologies Inc. is recognized as an innovator in the
development and manufacture of high performance, energy-saving films and
glass products that dramatically improve the energy efficiency of
architectural and automotive glass. Southwall is an ISO
9001:2000-certified manufacturer with customers in over 25 countries
around the world, including Audi, BMW, Guardian, Peugeot-Citroen,
Pilkington, Renault, Saint-Gobain Sekurit, and Volvo.

This press release may contain forward-looking statements, including,
without limitation, statements regarding the Company's expectations,
beliefs, intentions, or strategies regarding the future.All
forward-looking statements in this press release are based on
information available to the Company on the date hereof, and the Company
assumes no obligation to update any such forward-looking statements.These
statements are subject to certain risks and uncertainties that could
cause actual results to differ materially from those presented.These
risks include the possibility that the Company’s expected future results
will be materially worse than estimated, that the Company may not
continue to be profitable in future quarters or may not be able to
achieve future long-term growth, that there will be a decline in one or
more portions of our business in 2009 or thereafter, that the Company
will not be successful in improving operating performance or controlling
costs, that the Company will suffer a decline in manufacturing or
financial effectiveness, that the Company’s new product development will
not be successful, that there may be decreasing demand in certain
markets and that the Company will not be able to secure additional
financing if required, as well as risks associated with any failure to
meet potential covenant requirements under future credit facilities.Further
risks are detailed in the Company's filings with the Securities and
Exchange Commission, including those set forth in the Company's most
recent Annual Report on Form 10-K for the year ended December 31, 2008,
filed on March 26, 2009.

SOUTHWALL TECHNOLOGIES INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

Three months ended

Nine months ended

September 30,

September 30,

September 30,

September 30,

2009

2008

2009

2008

Net revenues

$

8,600

$

10,632

$

23,430

$

34,887

Cost of revenues

4,867

6,383

13,554

20,063

Gross profit

3,733

4,249

9,876

14,824

Operating expenses:

Research & development

771

976

2,118

2,372

Selling, general and administrative

1,960

1,852

5,810

6,170

Total operating expenses

2,731

2,828

7,928

8,542

Income from operations

1,002

1,421

1,948

6,282

Interest expense, net

(321

)

(170

)

(492

)

(433

)

Other income (expense), net

12

(238

)

3,211

(123

)

Income before provision for income taxes

693

1,013

4,667

5,726

Provision for (benefit from) income taxes

(17

)

5

174

326

Net income

710

1,008

4,493

5,400

Deemed dividend on preferred stock

122

122

366

367

Net income attributable to common stockholders

$

588

$

886

$

4,127

$

5,033

Net income per share:

Basic

$

0.02

$

0.03

$

0.14

$

0.18

Diluted

$

0.02

$

0.03

$

0.13

$

0.16

Weighted average shares used in computing net income per share :

Basic

28,728

28,409

28,715

28,099

Diluted

34,685

34,681

34,085

34,016

SOUTHWALL TECHNOLOGIES INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

September 30,

December 31,

2009

2008

ASSETS

Current assets:

Cash and cash equivalents

$

12,845

$

10,768

Restricted cash

-

282

Accounts receivable, net

4,799

3,709

Inventories, net

4,677

5,965

Other current assets

1,302

745

Total current assets

23,623

21,469

Property, plant and equipment, net

14,233

15,012

Other assets

407

804

Total assets

$

38,263

$

37,285

LIABILITIES, PREFERRED STOCK AND
STOCKHOLDERS' EQUITY

Current liabilities:

Current portion of long term debt and capital lease obligations

$

1,141

$

1,767

Accounts payable

1,190

596

Accrued compensation

958

1,372

Other accrued liabilities

5,085

5,127

Total current liabilities

8,374

8,862

Term debt and capital lease obligations

3,639

4,501

Other long term liabilities

84

2,514

Total liabilities

12,097

15,877

Series A, convertible preferred stock

4,810

4,810

Stockholders' equity:

Common stock

29

29

Capital in excess of par value

78,292

78,323

Accumulated other comprehensive income

4,565

4,269

Accumulated deficit

(61,530

)

(66,023

)

Total stockholders' equity

21,356

16,598

Total liabilities, preferred stock and stockholders' equity

$

38,263

$

37,285

SOUTHWALL TECHNOLOGIES, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

Nine months ended

September 30,

September 30,

2009

2008

Cash flows from operating activities:

Net income

$

4,493

$

5,400

Adjustments to reconcile net income to net cash provided by
operating activities:

Gain on settlement of liability

(2,359

)

-

Deferred income tax

(77

)

(49

)

Gain on disposal of property, plant and equipment

(24

)

-

Depreciation and amortization

1,911

2,054

Stock-based compensation

294

162

Changes in operating assets and liabilities:

Accounts receivable, net

(1,072

)

(840

)

Inventories, net

1,336

(304

)

Other current and non-current assets

(65

)

827

Accounts payable and accrued liabilities

(258

)

(870

)

Net cash provided by operating activities

4,179

6,380

Cash flows from investing activities:

Restricted cash

261

-

Proceeds from sale of property, plant and equipment

34

-

Expenditures for property, plant and equipment

(975

)

(1,047

)

Net cash used in investing activities

(680

)

(1,047

)

Cash flows from financing activities:

Proceeds from exercise of stock options

42

293

Borrowings from equipment financing

26

603

Investment credit in Germany

221

-

Repayments of term debt and capital lease obligations

(1,719

)

(883

)

Net cash (used in) provided by financing activities

(1,430

)

13

Effect of foreign exchange rate changes on cash and cash equivalents

8

(165

)

Net increase in cash and cash equivalents

2,077

5,181

Cash and cash equivalents, beginning of period

10,768

6,492

Cash and cash equivalents, end of period

$

12,845

$

11,673

Source: Southwall Technologies Inc.

Southwall Technologies Inc.Mallorie Burak, 650-798-1200

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